Glossary · Stocks and markets
CAPE ratio (Shiller P/E)
The CAPE ratio (Shiller P/E) is a stock market’s price divided by its average inflation-adjusted earnings over the last 10 years.
Also called: Shiller P/E, CAPE, cyclically adjusted price-to-earnings ratio, PE10
Oct 2026. Higher than in 99% of months since 1881; average 17.8.
In plain words
Judging a lemonade stand by one summer is risky: a heat wave makes it look like a gold mine, a rainy year like a dud. Better to average ten summers. The CAPE ratio does that for the stock market: it divides today’s price by the average profit of the last ten years, adjusted for inflation.
The economists John Campbell and Robert Shiller used it in their research from the late 1980s, and Shiller’s book “Irrational Exuberance” (2000) made it famous, which is why it is also called the Shiller P/E. CAPE stands for cyclically adjusted price-to-earnings.
For the S&P 500 it is 40.7 now (Oct 2026), against an average of 17.8 since 1881. Its highest reading was 44.2, in Dec 1999.
Example
One bad year, two different answers
- A market trades at 2,000 points. Its real earnings over ten years averaged 100 a year: CAPE = 2,000 ÷ 100 = 20.
- Last year was a recession and earnings fell to 40. The ordinary P/E = 2,000 ÷ 40 = 50: the market looks wildly expensive.
- The ten-year average barely moves (to 94), so CAPE is about 21.
- In a boom year with earnings of 160 the P/E drops to 12.5, while CAPE stays near 19.
The P/E jumps with each year’s profits; CAPE changes slowly, which makes it better for comparing decades and useless for timing a single year.
One level deeper
The recipe: take each month’s earnings over the last ten years, convert them to today’s dollars with the consumer price index, average them, and divide today’s price by that average.
Why bother? Because high starting valuations have gone with lower returns over the following decade. In the chart below, months when CAPE was above 30 were followed by an average real return of −1.0% a year over the next ten years; months when it was below 10, by 11.3% a year.
The caveats: it is a poor timing tool (CAPE stayed above its average for most of the 1990s and the 2010s while stocks kept rising), accounting rules for earnings have changed over the century, and today’s companies pay out less and buy back more, which may push CAPE up for reasons that have nothing to do with prices.
Starting CAPE and the next ten years
Every month since 1881 is sorted by its CAPE; then we look at the S&P 500’s real total return over the following ten years (dividends reinvested, after inflation). The higher the starting CAPE, the lower the average return has tended to be, but each group hides a wide range, and the ten-year periods overlap.
The numbers behind the chart
| Average real return a year, next 10 years | |
|---|---|
| Below 10 | 11.3% |
| 10 to 15 | 7.6% |
| 15 to 20 | 6.0% |
| 20 to 25 | 4.6% |
| 25 to 30 | 5.9% |
| Above 30 | −1.0% |
Why it matters
It is one of the few valuation measures with more than a century of history behind it.
It has had a decent record for the decade ahead and almost none for the next year: a useful reminder of what valuations can and cannot tell.
When CAPE was very high, as in 1929 and 1999, long stretches of poor returns followed.
A common mistake
Myth: A high CAPE means a crash is coming soon.
In fact: CAPE can stay high for years: it was above 25 from 1997 until mid-2002, and prices kept rising until 2000. It says more about the average return over the next decade than about when a fall will start.
Questions people ask
What is a high CAPE ratio?
High compared with its own history: the S&P 500’s CAPE has averaged 17.8 since 1881. Readings above 30 were rare until recently: around 1929, from 1997 to 2002, and in most years since 2017. It is 40.7 now.
What is the difference between CAPE and P/E?
The P/E divides the price by one year of earnings; CAPE by the average of ten years, adjusted for inflation. CAPE ignores a single boom or bust year, so it moves more slowly.
Does CAPE work for other countries?
The same calculation works for any market with long earnings data, and researchers have found a similar pattern in many countries: higher CAPEs, lower returns over the next decade. Levels differ by country, so each market is best compared with its own history.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- S&P Composite (price, dividends, earnings, CAPE), US consumer prices and the 10-year Treasury rate: Robert J. Shiller, Online Data (shillerdata.com).
- S&P Composite price and total return since 1871, and US consumer prices: Robert J. Shiller, Online Data (shillerdata.com); total return with dividends reinvested monthly, calculated by BigCapital.
- The groups overlap: each month’s ten-year return shares almost all of its years with the next month’s, so the history behind each bar is shorter than its number of months suggests. Above 30 there are 57 months, nearly all from a few episodes.
- This page explains a term. It is not investment advice.